Mortgage Deduction maximized under the Fair Tax

In the arena of tax policy and tax reform the income tax deductions for Mortgage interest seems to be cast in stone and never to be touched. This is the one tax deduction every homeowner knows to include in his tax return and a benefit that the President has asked his tax reform panel to keep. There is only one tax reform package that meets this goal and then maximizes it - The Fair Tax Legislative package.

The actually benefit has diminished under the archaic income tax code. As income tax brackets have lowered and interest rates have lowered so has the amount of dollars you get back from your mortgage interest deduction. The Tax payer in a 25% federal tax bracket faithfully files a return on or before April 15th to get a deduction which only gives him back $250 of his own money back per $1,000 spent in Mortgage interest. When upper tax brackets used to be 50% to 70 % Americans would get back even more. However, the 7.65% Americans pay out in payroll tax provides no deductibility or return at all.

In addition, American families still have to pay the mortgage principal out of after tax dollars. For many middle class Americans that includes a 25% federal income tax and a 7.65% payroll tax for a total federal tax bite of 32.65%. On a $100,000 mortgage at 6% a family might get back $1500 with a mortgage interest deduction but you get no deduction for the principal paid. You pay that with after tax dollars.

There is a Tax Reform package in Congress that would maximize the Mortgage deduction in a totally new way with added benefits for families and home ownership. Under the Fair Tax, American workers get 100% of their paychecks with no payroll tax or income tax taken out. The 32.65% they had subtracted each week is now in their pockets to help pay the principal on their mortgage or any other important family needs. You end up with the income tax equivalent of a 100% deduction of principal and interest by replacing the income tax and the IRS with the Fair Tax.

The Fair Tax reform package is well documented and researched on the Fair Tax website www.fairtax.org. It has been reintroduced in the 109th Congress as HR25 and S25. The Fair Tax legislative package first eliminates the current income tax system on American families and American business. Elimination of hidden business taxes will first cause prices to drop 22 to 25%. The Fair Tax than adds in a federal retail sales tax of 30% (equivalent to income tax of 23%). American consumers will pay about the same as they did before but take home a much larger paycheck. The Fair Tax is revenue neutral, bringing in the same revenue as current income taxes, Social Security taxes and Medicare taxes and estimated to grow the Economy 10.5% in its first year.

If you want tax reform that gives you more take home pay and a maximized Mortgage deduction for interest and principal than call your Congressmen and Senators and tell them you support the Fair Tax Legislative package HR 25/ S25. For more information visit www.fairtax.org and read the FAQ section.

Top Ten Economic Benefits of the Fair Tax Package

Nonpartisan Fair Tax Legislative Package-HR 25/S25

1. Preserves Social Security and Medicare with an expanded tax base that is revenue neutral and provides an opportunity for private retirement savings accounts without taking $2trillion out of Social Security to pay for it. (See #8 & #9)

2. Removes the most regressive tax on the poor and middle class- the payroll tax. Also eliminates the personal income tax, AMT and death tax.

3. Removes business income and payroll taxes resulting in a drop in prices by 22 to 25%. Saves an estimated $250 Billion annually in tax compliance costs.

4. Eliminates the cumbersome IRS Tax code and replaces it with a National Sales tax of 30%(income tax equivalent of 23%). With price drop consumers pay about the same.

5. Fights outsourcing; increases Manufacturing and business growth back in America. Boosts Economic Growth an estimated 10.5% in the first year. Increased job growth.

6. Reduces the trade deficit because exports will not pay the sales tax and be 22 to 25% cheaper for sale overseas. Leveling playing field with low wage countries. (Union support)

7. US shores will be the corporate tax -free zone not the Bahamas. Corporate headquarters and many other businesses can return to US soil and be more competitive.

8. Average working families take home 100% of their paychecks, no Federal income tax or payroll deductions. Average family of 4 making $50,000/yr takes home $7500 more.

9. Families have more Spendable income for Health Insurance, Childcare, College tuition, and Private retirement Savings accounts. It’s their choice for their family. “Ownership”

10. Fair Tax package is revenue neutral and Progressive with a Prebate of Sales tax up to the Poverty line of spending. Family of 4 gets $479/m. Couple receives $357/m.

The Fair Tax is revenue neutral, progressive and fair. Net tax rate for the Poor at the poverty line is 0%, for the middle class at twice the poverty line is 11.5%; for 4 times poverty line 17.2% and the more you spend your net rate is between 20 and 23%.

The Fair Tax meets requirements set by President Bush when he said, "simplify" the tax code in a way that is fair, does not raise or lower the overall tax burden and better promotes "long-run economic growth and job creation." It also meets his standard for promoting Home ownership and Charities.

Get the facts at http://www.fairtaxvolunteer.org/smart/faq.html

Family Friendly Tax Reform – www.fairtax.org

Time to sweep out the old code and bring in a fairer and simpler system forAmerican Families, American Workers and the American Economy.

Tax Reform with far less pain and much more gain in One Legislative package HR25/S25.

It is time to sweep out the old code and provide a "New Deal" for younger workers in the 21st Century. Support The Fair Tax and the "Tier 2 Solution" for Social Security Reform. 

Social Security - " Tier 2 Solution"

FDR style “New Deal” for the 21st Century


President Bush said in his State of the Union Speech that he was open to listening to ideas on Social Security Reform while Congressmen have suggested that it should be combined with comprehensive tax reform and tax simplification. If we are going to fix not only Social Security but also the core idea of Retirement savings and security for all Americans, than we have to think bigger and not just tinker with the edges. President Bush has agreed that Private accounts alone don’t solve the problem. We need a redesign not a patchwork nailed to a Horse and buggy system of the last century.

America needs to restore and improve the idea of Retirement Savings and Security. The Three legged stool of Company pension, private retirement savings and Social Security is broken. Not just Social Security having a negative Cash flow in 2018 but the other two legs of Retirement Security that are also failing are company pensions and private savings. Americans have the lowest savings rate in the industrialized world. Even with IRA savings options for the working poor and the middle class our savings rate continues to be poor. Company provided pensions as well as secure jobs at one employer for 40 years are both disappearing. Social Security has become the one leg still standing for most Americans but Social Security was never intended to be the sole or main means of support.

What American workers need is a FDR style “New Deal” for the 21st Century. First we grandfather everyone born before 1975 into the old Social Security system (Tier One). Secondly, we develop a new three-legged stool for all the children and grandchildren of Tier One generation and provide them with the “Tier 2 Solution”. The concept of a tiered system has been implemented for public school teachers and municipal workers in States like New York who have adjusted to the economic realities for retirement and have encouraged state employees to save with private accounts as well.

The Tier 2 Solution will provide and promote 3 legs for Retirement Savings and Security for Americans under age 30, providing a stronger retirement future with less dependence on the Government for a comfortable retirement. These children and grandchildren of Baby Boomers and Tier One retirees will have 35+ years to continue working and saving. But to secure a better future it requires the older generations along with their Congressmen and Senators to leave them a legacy comparable to the FDR “New Deal” that was given to them.

First we need to set the record straight on what the Government is collecting. It is currently collecting taxes not collecting worker’s savings contributions. The bottom line is the Government collects on younger workers an average 25% income tax and a 12.4% Social Security tax (half from their employer). 37.4% of wages is going to Uncle Sam in taxes. The reality is Social Security is a pay as you go system not a savings account and for many younger workers it is no different than sending out a Welfare check each month to those that need it. The problem is they are not sure if it will be there when they need it. They see the math and the money just goes into one big pot and gets spent. To this generation, Social Security is just a Government program that sends out monthly checks and feels you cannot call it a savings plan. Social Security taxes are just like income taxes to them. Taxes go in and money goes out to fund programs and departments like Education, Defense, Medicare and Social Security. The fact is that in 37 years (2042) Social Security will have a 25% shortfall in making payments. Is that the legacy Baby Boomers want to leave to their children and grandchildren?

In order to restore confidence and the sacred trust that younger Americans should have with their Government, than we need to provide a retirement and tax system that is fair, believable and deserving of the younger generations support.

The Tier 2 Solution for Social Security includes:

1. Social Security Safety Net that is honest and fair; Designed to keep future Seniors out of Poverty.

2. Private and Portable Pension Savings Plan with US Government Matching of 50% up to $1,000.

3. Additional Personal Savings provided by a Tax Reform Package that Give Every American Family a Raise with more take home pay and spendable income for savings and essential family needs.

1.) Social Security Safety Net – Younger workers still want Social Security as a safety net to provide a portion of what is needed to keep them out of poverty. They realize they have a responsibility to save for the rest and would rather use mutual funds to do it. The Tier 2 Solution proposes rearranging how the Social Security revenue and current surpluses are used for the Tier 2 generations that start retiring in 37 years or 2042.


a.) Tier 2 proposes a single standard Social Security payment for all Tier 2 retirees. This will be standard for every individual no matter how much they made in their lifetime or contributed in taxes whether old style regressive payroll taxes or under a new system of taxation. It wouldn’t matter if you were married or widowed or single. Each individual retiree would receive the same size check each month. If Government is going to provide the benefit than it should be an equal benefit just like a welfare check.

b.) In 2004 dollars, the goal would be to provide a saftey net set at the poverty line for an individual. Health and Human services calculates poverty line at $9,310/ year, which equals $775/month. That is more than some Poor Seniors receive today from Social Security. This leaves the other 2 legs to maintain a retirement that is at least twice the poverty line.
c.) This Standard Social Security payment will provide an honest and fair foundation for future retirees. The widow who made very little in her life will have the same base check as the millionaire. This is a fairer use of Social Security revenue that will restore confidence and a Sacred trust with a new and younger generation.


2.) Private Pension Savings Plan – The Company pensions of the older generations are gone, in fact some like Bethlehem Steel’s had to be bailed out by the Government. The Pension Concept is very important to the three-legged stool of Retirement Security and must be reinvented for this Younger generation.

a.) The most successful example is with companies that provide a 401(k) plan with matching dollars from their employer. The number of companies that provide such plans is small. The vast number of employers are smaller companies that don’t provide retirement options at all nor can they afford the overhead and expense to set up one. Other companies provide 401(k) plans but provide no matching incentive.

b.) The Government already has a system for federal employees that all workers can plug into and would be portable no matter how often you had to change jobs. The Federal Plan is called the Thrift Savings Plan (TSP). There are 5 or 6 conservative mutual fund choices that are low cost to operate and don’t make any Wall Street companies very rich at all. A conservative mix of Bonds and blue chip stocks that will likely average a 6% return.

c.) Matching Funds. For every dollar an American puts in to their Tier 2 Pension, Uncle Sam will match with 50 cents to a maximum of $1000. If you save $2000 dollars in your Tier 2 Pension than the Government puts in $1,000 for a total of $3,000. This will provide the incentive for all income levels to save into a Government sponsored but privately owned pension system.

d.) Annuity style pay out only. To insure a strong second leg for retirement security the Tier 2 Pension should be more like an old General Motors pension with a monthly payout for life and a lump sum death benefit when you pass. Allow distribution as early as age 60 and at age 67 Social Security will kick in and provide an additional inflation fighter.

e.) Retirement will be more secure and comfortable if you don’t allow borrowing or cashing in of the Pension. It also assures future generations and tax payers that they won’t have to bail out their parents because they decided to borrow on their pension for a business venture or RV.

f.) Paying for it – Use the existing Social Security revenue collected from payroll or alternatives being suggested in tax reform along with the Billions currently in the trust fund. By going to a standard Social Security payout in 2042 you have reduced the Government outlay on that side and used those savings to fund the matching pension plan of 50 cents on the dollar for those under 30 today.

g.) Grows to how much? If you put in $2000/yr and Uncle Sam matches $1,000/ year in 30 years at Age 60 the first Tier 2 retiree would have $244,297 with a conservative 6% average rate of return. That would be an annuity payment for life of $1950/m.

3.) Additional Personal Savings – The third leg of retirement security and savings. The first two legs provide monthly income security but everyone should also save for other emergencies and large cost items. Americans need to save more in their own private personal accounts that can be accessed throughout their lifetime for current needs and emergencies. Unfortunately many American Families are already overstretched financially and find it harder to save at the end of each month when their take home pay is eaten up by income tax and payroll taxes. There is one tax reform proposal that is in Congress that can provide additional Take home pay for every American Family. It is the Legislative package HR25/S25 – commonly called the Fair Tax. www.fairtax.org or My Blog at Tax Reform "Fair To All"

a.) Average American Family of 4 with household income of $50,000/yr will have over $7500 more in take home pay and spendable income. That is extra money to save in the private pension plan and extra money to save in their own savings or investment account.

b.) American workers take home 100% of their paychecks free of income tax and the regressive payroll tax. The Payroll tax is responsible for suppressing wages and job growth.
c.) Families are free to Save for additional Retirement security and or a combination of other family needs; Health Insurance; Child Care; College tuition; Down payment on a home. All are possible with an extra $7500 / yr under the Fair Tax.

d.) Economic growth and the development of good paying jobs will help fund Social Security and Medicare in the future. With a growing economy the Treasury takes in more revenue and can fund programs, pay down the National Debt and Balance the budget.

e.) Economic Growth under the Fair Tax is estimated at 10.5% in the first year.

For more information on how the Fair Tax improves our economy and allows families to take home more pay, visit their web site www.fairtax.org and review their FAQ section or read more reading the articles below.

What younger workers need is a comprehensive “New Deal” plan that combines Social Security reform and Tax reform. A combination of the “Tier 2 Solution” and the Fair Tax Legislative package can restore the sacred trust between Government and a new generation of working Americans. Together they provide a solid three-legged stool of retirement security for workers and economic security for the nation.

Give Every American Family A Raise

(Average Family making $50,000/yr takes home $7500 more in take home pay and increased purchasing power..)

Are Republicans and Democrats really thinking about American Families when they discuss Social Security Reform and Tax Reform? Republicans in the House and Senate may need to reach a consensus before the President’s Tax panel reports in July. The election cycle will start up again very soon and the longer Republicans wait to act the less likely they will be able to accomplish major reform. There may be an answer for Republicans and Democrats waiting in the wings – The Fair Tax Legislative package-HR25/S25 – www.fairtax.org

Grover Norquist of Americans for Tax reform has been quoted as having the belief that Washington will only tinker with the current code and not make a major move. Congressman Bill Thomas has opened that door wide to consider major tax reform that handles the regressive payroll tax, long-term care for Seniors, retirement savings, Social Security and Medicare reform for the long haul and much more.

Republicans will certainly discuss the guidelines or markers that President Bush set down for his Tax Reform Panel and the concerns his Social Security Commission reported as well. Republicans are aware that major reform needs some bipartisan support as well. However, neither party is addressing reform that helps American Families and American workers. Neither party has addressed the most regressive tax on the working poor and Middle class. Democrats don’t believe there is a Social Security problem but they fail to see the regressive payroll tax draining the life out the workingman’s paycheck and suppressing wage growth in the American Economy.

Both parties may tinker with the edges of a bloated and over bearing tax code to give crumbs back to American Families, if and only if they file on April 15th correctly to get a tax return of their own money. In all most every tax return you are talking about getting back your own money! But to file your 1040 tax form by yourself you have to go through 104 pages of instructions. That’s not fair and that’s not right.

American Workers don’t want to wait for their tax return in the mail. They all just want a raise. Let them keep more of what they earn not by filing and asking permission to get it back from Uncle Sam but let them take home more pay each week to feed, clothe, house and save for their own families. That requires major Tax Simplification and reform and it is time for both Republicans and Democrats to show leadership and get it done.

The answer to true reform, fairness and simplification that meets the needs of American Families and meets the Presidential guidelines set out for the Tax reform panel is the Fair Tax Legislative Package –HR 25/S25 (www.fairtax.org). There is a ten-fold economic benefit to American Families, American workers and the American economy in the Fair Tax Legislative package. This is the Nonpartisan solution that they all seek.

The Fair Tax is true Tax Simplification that is Progressive and Revenue Neutral.

Congressional Bill - HR 25/S25 - commonly called the Fair Tax is a comprehensive package that eliminates all income, payroll and business taxes as well as the inheritance tax, AMT and Capital gains taxes. This will first cause prices to drop 22 to 25% before you add in the Federal Retail Sales Tax. Consumers will pay close to the same as they pay now but take home 100% of their paycheck free of federal income tax and free of Payroll taxes.

Some of the Ten-fold economic advantages include:

Exports are not taxed under the Fair Tax; Combined with the price drop of 22 to 25% this means a BOOM in manufacturing and production back in the US; Bringing back good paying jobs and fighting outsourcing. Economic growth in the first year is estimated at 10.5%. European countries are lowering their business taxes to match the great success that Ireland has experienced. Ireland has the lowest Corporate Tax rates of about 12%. Under the Fair Tax the business tax rate is lowered to 0% for exports. U.S. soil will become the number one place in the world for Corporate Headquarters and for manufacturing plants and service companies. Instead of the Bahamas being the tax free zone for business the entire United States will become a tax free zone for business. That translates to jobs and more jobs. That is what American Families want and what our quality American Workers need. This should be considered Pro-Union, Pro workingman Tax reform package.

HR 25/S25 also has a Prebate system, where every family of 4 will receive a $479 check monthly as a rebate on all Sales tax paid up to the poverty line of spending of $24,900. A couple would receive $357/m and an individual $178/m. This makes the Fair Tax progressive and fair. Net effective tax rate for the Poor at the poverty line is 0%, for the middle class at twice the poverty line is 11.5%; for 4 times poverty line 17.2% and the richer you are and the more you spend your net rate is between 20 and 23%

No other Legislative package replaces the payroll tax and the income tax with a broader tax base that is revenue neutral for the National Budget, Social Security and Medicare and on top of it gives every American Family a raise in take home pay.

With a broader tax base the Fair Tax lowers the effective tax rate for everyone. Giving an average American family of 4 making $50,000 over $7,500 more in take home pay and after tax purchasing power. That is money that can be saved for retirement; buy a Health Insurance policy; pay for long-term Care insurance; pay for College tuition or any other family priority. The choice belongs to the family not to a government tax credit to be applied for on April 15th. That is true “Ownership” for an Ownership society.

Senator Lindsey Graham of South Carolina has advocated raising the payroll tax’s taxing limit above the current $90,000 level. Under the Fair Tax you eliminate the payroll tax and give every American family a Raise. You also broaden the tax base for Social Security and Medicare when the wealthier among us spend more than $90,000 they are still supporting the Social Security and Medicare systems. Senator Graham does not have to stay with the out dated income and payroll tax system and fight the battle of raising the Social Security taxing limit up from $90,000 to $120,000 as he has proposed. It doesn’t matter if the wealthy inherit the money; earn it from investments or Capital gains, from offshore or onshore accounts because when they spend $120,000 or $1.2 million on new products or services, they will now be supporting Social Security and Medicare. As the economy grows you continue to strengthen Social Security and Medicare with this broader tax base.

Under the old tax code the wealthy in a 35% tax bracket would pay $1000 in mortgage interest and get $350 back on their taxes. The Middle class in a 15% tax bracket might pay $1,000 in mortgage interest and only get $150 back on their taxes. Under the Fair Tax you take home 100% of your paycheck with no income tax or payroll tax taken out. There is nothing to get a deduction from; you already got 100% back. This increases possibilities for home ownership for many lower income Americans because they will have more spendable income to afford a Mortgage and a home.

The Sales Tax portion of the Fair Tax does not apply to a used or previously built home. However, new homes under the Fair Tax will have major cost savings and will be 22 to 25% less to construct. Once you add on the Sales tax it will cost close to what it costs now. Therefore when the wealthy build a new Mini-mansion for $900,000, they will pay their fair share. This is where the Fair Tax answers Democrat’s concerns for taxing inherited wealth and providing for Tax Fairness and Progressivity. When the wealthy spend more they pay more. It’s fair and it’s simple. In addition, the Fair Tax could cause a boom to Housing because interest rates are estimated to drop 20 to 30%. This makes it easier to buy a home for everyone and reduce their current mortgage payments, if they refinance. The Fair Tax maintains the benefits for housing and home ownership that the President seeks from his tax reform panel by making it easier to save and pay for a home.

Charitable giving will not need to be a deduction for similar reasons. There is not an income tax to deduct from. You get all your money with no taxes taken out. When you give to church or to charity, you pay no Sales tax and you give for an honest reason not for a tax break on your income taxes. The United State is a generous nation, 70% of the population gives but does not itemize their charitable giving. Charities do better when economic conditions are growing. First year under the Fair Tax, the economy is estimated to grow 10.5% and if Tsunami relief donations are any indication, charitable giving will increase under the Fair Tax not decrease. In addition, your Church or charity no longer pays payroll taxes and has that money now available to help those in need or expand their programs.

The Fair Tax taxes consumption of the undocumented alien community who are often paid primarily in cash with no income taxes filed. When they go to Wal-Mart or Target they will pay their fair share of tax, thereby supporting the National budget, Social Security and Medicare. When tourists visit and spend money in the US they will also pay the tax. Because of the elimination of business and payroll taxes prices to consumers and tourists will be about the same as they are now. The States of Florida and Texas support their budgets on a sales tax and have no income tax. The US government can easily do the same.

State and local Governments will benefit from going to the Fair Tax system nationally. By eliminating the employer paid portion of the payroll taxes, there will be a major savings in municipal payrolls and in payrolls for local school districts. This savings will go a long way to helping those states and local governments with their own budget issues.

The Fair Tax Supporters are eager to share how their non-partisan package is revenue neutral for the US treasury and provides multiple solutions to the country's economic and tax concerns in one political package that both parties can support. Supporters believe it is "Family Friendly Tax Reform" whose time has come.

Visit the FAQ section of www.fairtax.org for further information.

Sign the on-line petition and let your Congressman and Senators know that you support the Fair Tax Package HR25/S25.

It is time to sweep out the old and bring in the new simpler and fairer tax system with the power to supercharge our economy to compete more fairly in the global marketplace and grow a financially stronger ownership society here at home.
 

Tax Reform with Far Less Pain and much more Gain. 

Fair Tax Top Ten Economic Benefits

Nonpartisan Fair Tax Legislative Package-HR 25/S25

1. Preserves Social Security and Medicare with an expanded tax base that is revenue neutral and provides an opportunity for private retirement savings accounts without taking $2trillion out of Social Security to pay for it. (See #8 & #9)

2. Removes the most regressive tax on the poor and middle class- the payroll tax. Also eliminates the personal income tax, AMT and death tax.

3. Removes business income and payroll taxes resulting in a drop in prices by 22 to 25%. Saves an estimated $250 Billion annually in tax compliance costs.

4. Eliminates the cumbersome IRS Tax code and replaces it with a National Sales tax of 30%(income tax equivalent of 23%). With price drop consumers pay about the same.

5. Fights outsourcing; increases Manufacturing and business growth back in America. Boosts Economic Growth an estimated 10.5% in the first year. Increased job growth.

6. Reduces the trade deficit because exports will not pay the sales tax and be 22 to 25% cheaper for sale overseas. Leveling playing field with low wage countries. (Union support)

7. US shores will be the corporate tax -free zone not the Bahamas. Corporate headquarters and many other businesses can return to US soil and be more competitive.

8. Average working families take home 100% of their paychecks, no Federal income tax or payroll deductions. Average family of 4 making $50,000/yr takes home $7500 more.

9. Families have more Spendable income for Health Insurance, Childcare, College tuition, and Private retirement Savings accounts. It’s their choice for their family. “Ownership”

10. Fair Tax package is revenue neutral and Progressive with a Prebate of Sales tax up to the Poverty line of spending. Family of 4 gets $479/m. Couple receives $357/m.

The Fair Tax is revenue neutral, progressive and fair. Net tax rate for the Poor at the poverty line is 0%, for the middle class at twice the poverty line is 11.5%; for 4 times poverty line 17.2% and the more you spend your net rate is between 20 and 23%.

The Fair Tax meets requirements set by President Bush when he said, "simplify" the tax code in a way that is fair, does not raise or lower the overall tax burden and better promotes "long-run economic growth and job creation." It also meets his standard for promoting Home ownership and Charities.

Get the facts at http://www.fairtaxvolunteer.org/smart/faq.html

Family Friendly Tax Reform – www.fairtax.org

Time to sweep out the old code and bring in a fairer and simpler system for
American Families, American Workers and the American Economy.

Tax Reform with far less pain and much more gain in One Legislative package HR25/S25.

Those that know the Facts Love the Fair Tax 

Time to bury the old code and bring in a new simpler code to supercharge our economy and create better paying jobs. 

War on Taxes and Tax Reform

It is not just a debate in Congress but a full out war of ideas on how to improve Social Security and Reform the Tax code. Some see them as separate battles while others want to combine them into one offensive with a date certain to be done. Like calls for Peace and Stability in Iraq where both Democrats and Republicans want the people of Iraq to have Ownership of their own country and freedom to choose what is best for their families, there is also similar language being used by Democrats and Republicans who are fighting for an “Ownership Society”, freedom of financial choice and retirement security.

Both President Bush and The Democratic Leadership have called for Tax Simplification and Reform. House Minority Leader, Nancy Pelosi sent an open Letter to President Bush on Tax Reform in which she outlined 3 key points for tax reform; 1) Tax Simplification 2) Tax Fairness (Progressivity) 3) Revenue Neutral. She also highlighted the Alternative Minimum tax as a growing danger to the middle class. The President outlined for his Tax reform panel similar guidelines when he said, "simplify" the tax code in a way that is fair, does not raise or lower the overall tax burden and better promotes "long-run economic growth and job creation."

Now the question in this war of ideas is what will Social Security reform and Tax Reform really look like. In addition to the broad brush of ideas from the leadership are the small insurgencies by members of Congress.

Congressman Rahm Emanuel (D-IL) is advocating retirement and savings reform and was recently quoted saying, “that what we really need is a Savings Revolution”. In fact, he believes the President and I assume his fellow Democrats are not thinking “big enough”. If they only tinker with the edges of both Social Security reform and tax reform, I would say he is right. Though the Congressman would fund it differently than the President, he is advocating Private retirement savings accounts. He realizes as did President Clinton that Social Security is in trouble and responsible Legislators need to promote a plan to fix the problem not ignore it. This is one of the insurgents not stepping in line with the Democratic leaderships view that there is no problem in Social Security.

On the Republican side we have Congressman Bill Thomas the Chairman of the House Ways and Means Committee, known as an independent thinker and occasional Republican maverick, he has thrown a few of his own grenades this past week or two and opened up the tax reform and Social Security debate, indicating that tax reform and the means by which we fund tax reform should also be re-evaluated. He has advocated that the debate should not be limited by the “small box” limitations of the payroll tax or the current and complicated income tax code. This out of the box thinking is further ahead than the President has outlined so far, but more in tune with the House Republican Leadership. Both Speaker Dennis Hastert and Majority Leader Tom Delay have expressed their interest in Tax Simplification and reform that includes replacing the income tax with a national sales tax. Congressman Thomas floated a trial balloon with a European style tax called a VAT but knows darn well it would be much easier to plug into the 45 states that already have a sales tax with a National Sales tax than to start from scratch a system like a VAT that no one in the U.S. is using or has any experience with.

The Republican Leadership along with many House Republicans realize that their re-election starts up again very soon. Waiting for the President’s Tax Reform panel will delay action on comprehensive tax reform and put Tax Simplification to close to the next election. Many Republicans would prefer a comprehensive package now and not wait for the Tax Panel report in July to start the debate. If they can strengthen Social Security at the same time, they better do it with one comprehensive package that American Families can see as Family Friendly. Republicans would be well served to reach consensus and debut a package around the April 15th tax filing deadline in order to have it pass both Houses and to the President’s desk no later than late summer.

The Democrats seem to have drawn their line in the sand on Social Security reform and private accounts, if reform means drawing or borrowing $1 to $2 Trillion dollars from Social Security to make it happen, Democrats are preparing to fight to the death. Republicans already have a counter proposal waiting in the wings that all sides can buy into. What if Congress could come up with a new way to fund Social Security that would strengthen it with a broader tax base and would allow for Family ownership of a separate retirement account? What if you also got Democratic support across the aisle because this tax reform eliminates the most regressive tax on the working poor and middle class (the payroll tax) and still funds Social Security and Medicare at the same level as today’s income tax (Revenue neutral)?
(Hint: The Fair Tax Legislative Package.)

In fact, there is already a strong and faithful core of reform soldiers who have been working for six years behind the scenes building a comprehensive legislative package that is a non-partisan answer for Republicans and Democrats– The Fair Tax Legislative package-HR25/ S25 – www.fairtax.org

The Republican leader of this fight has been Congressman John Linder (R-GA) who has been the key Sponsor of this bill. In the 108th Congress his Tax Reform bill had garnered the most support with over 55 Co-Sponsors including Senator Saxby Chambliss (R-GA) and Senator Zell Miller (D-GA). With the help of 560,000 supporters of AFFT- Americans for Fair Taxation, 350,000 members of the NTU – National Tax Payers Union, the 6 million members of the American Federation of Farm Bureaus and many others, Congressman Linder is striving for 100 Co-Sponsors in the 109th Congress and passage in 2005. Indication of broad congressional support for him and his bill is the fact that Congressman Linder was appointed to the House Ways and Means committee and to its very important tax writing subcommittee. In addition, we have seen the election of Congressmen and Senators who have supported either a National Sales Tax or have specifically endorsed the Fair Tax Package. (Senator Jim DeMint (R –SC), Senator John Thune (R-SD)).

When both sides stop throwing their grenades and are ready to show Americans that democracy can actually accomplish good, than Congress will find the planted flag of the Fair Tax waiting to be picked up. The time has come to liberate our economy of the shackles and tyranny of the Income tax code. The Income tax code has grown out of control and eroded the sacred trust between the American people and its Government.

Americans will find that the Fair Tax is a far better and simpler system without the contortions of credits, tax breaks, and tax loopholes that support the Lobbyists and special interests in Washington. It is time to sweep out the old code. Congress will find that there is a ten-fold economic benefit for American Families, American workers and the American economy in the Fair Tax Legislative package. It is already waiting in the wings and answers almost all the concerns raised by both Republicans and Democrats. This is the Nonpartisan solution that they all seek. The Fair Tax legislative package is true Tax Simplification that is Progressive and Revenue Neutral. Two of our largest state economies that also rival many European countries in economic power and output support their budgets with a sales tax and no income tax (Texas and Florida). Why can’t the US Government do the same?

Congressional Bill - HR 25/S25 - commonly called the Fair Tax eliminates all income, payroll and business taxes as well as the inheritance tax, AMT and Capital gains taxes. This will first cause prices to drop 22 to 25% before you add in the Federal Retail Sales Tax. Consumers will pay close to the same as they pay now but take home 100% of their paycheck free of federal income tax and free of Payroll taxes.

Exports are not taxed under the Fair Tax; Combined with the price drop of 22 to 25% this means a BOOM in manufacturing and production back in the US; Bringing back good paying jobs and fighting outsourcing. Economic growth in the first year is estimated at 10.5%. We can’t compete with low wage countries on wages but we can compete fairly with lower taxes (zero) on exports.

The Fair Tax Package also has a Prebate system to protect the poor, where every family of 4 will receive a $479/m rebate on all National Sales tax up to the poverty line of spending of $24,900. This makes the Fair Tax progressive and fair. With a broader tax base, the Fair Tax lowers the effective tax rate for everyone; Giving an average American family of 4 making $50,000 over $7,500 more in take home pay and after tax purchasing power. That is money that can be saved for retirement; buy a Health Insurance policy; pay for long-term Care insurance; pay for College tuition or any other family priority. The choice belongs to the family not to a government tax credit to be applied for on April 15th. That is true “Ownership” for an Ownership society. This provides the answer for Democratic support because the Fair Tax maintains revenue neutral funding of Social Security and gives working families more take home pay to save for retirement or for other family choices.

No other Legislative package replaces the payroll tax and the income tax with a broader tax base that is revenue neutral for the National Budget, Social Security and Medicare and on top of it gives every American Family a raise in take home pay.

Any tinkering with the current system will never meet the simplification goals that the President has laid out. Nor does a Flat Tax or VAT have the same Economic growth potential of 10.5% with a corresponding growth in exports; manufacturing; and jobs with better pay. The VAT tax is paperwork intensive, inflationary and a more complicated version of a National Sales tax because ultimately any tax on the supply chain or on business is just a hidden tax passed on to the consumer. A more honest approach is a Sales tax at the final point of retail purchase. This is easier to monitor and enforce as well. The Flat Tax leaves 90% percent of the current code in place because 90% of the 60,000 pages determine the various definitions of income before you impose even a flat tax. The Flat Tax also leaves a future breeding ground for Lobbyists and special interests to continue to tinker with the code and set up future tax loopholes where average Americans lose again.

The FairTax Package is the only solution that truly meets the needs of all sides in this debate with far less pain and much more gain.

It is time for the different factions to put down their slings and arrows and come together for the American people and win an economic war with tax reform that allows us to compete fairly in the global marketplace and become stronger financially at home. The Congressional exit strategy is to have a comprehensive win that provides for Tax simplification with elimination of the income and payroll tax (replaced with a National Sales Tax); Social Security reform that is revenue neutral and provides additional take home pay for additional savings as a family choice; Economic growth through lower taxes on exports that increases manufacturing and job growth; plus a progressive rebate feature so that those who make and spend more pay their fair share with no loopholes or tax gimmicks. The Fair Tax Package is the answer. www.fairtax.org

Those that know the Facts love the Fair Tax